American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Deadwood Labor? The Effects of Eliminating Employment Protection for Older Workers
American Economic Journal: Applied Economics
(pp. 74–111)
Abstract
We analyze mandatory retirement in Sweden, which eliminates employment protection at age 67. Employment falls by about 10 percent and total average earnings by about 20 percent immediately at age 67. Eight percent of jobs separate immediately due to loss of protection, with effects stemming from jobs with stronger initial employment protection (long tenure, firms subject to "last in, first out" rules), and those in the public sector. We examine the effects on continuing jobs. While wages appear rigid, we uncover novel, sizeable intensive-margin hours reductions, resulting in an 8 percent drop in earnings conditional on staying on the job.Citation
Saez, Emmanuel, Benjamin Schoefer, and David Seim. 2026. "Deadwood Labor? The Effects of Eliminating Employment Protection for Older Workers." American Economic Journal: Applied Economics 18 (4): 74–111. DOI: 10.1257/app.20250414Additional Materials
JEL Classification
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
- J22 Time Allocation and Labor Supply
- J26 Retirement; Retirement Policies
- J31 Wage Level and Structure; Wage Differentials
- J63 Labor Turnover; Vacancies; Layoffs
- K31 Labor Law